The European Union is demanding a potential veto on Britain's post-Brexit laws and regulations, The Times newspaper reported on Saturday, citing senior government officials.
The British daily reported that EU's chief negotiator, Michel Barnier, is said to be insisting that London must agree not to implement any change to UK legislation that could distort trade with the bloc without first consulting Brussels.
Barnier's UK counterpart, David Frost, has rejected the approach, The Times reported.
EU diplomats said earlier that Barnier went to London on Tuesday to tell Frost Britain must move on state aid, or there will not be a Brexit agreement.
The chances of Britain leaving the European Union without a trade deal have risen sharply as negotiations have been threatened by London's insistence that it have full autonomy over its state aid plans.